NICEP: Economic recovery to 'run out of steam'
- 31 March 2014
- From the section Northern Ireland
Economic recovery could run out of steam unless businesses start to spend over the next two years, according to a leading economic think tank.
In its quarterly forecast, the Northern Ireland Centre of Economic Policy (NICEP) said the short term outlook for both the Northern Ireland and wider UK economies has improved.
The report said growth is expected to accelerate to 2.8% this year.
However the medium term forecast is "more cautious".
NICEP said that increased consumer confidence and job creation will help the economy grow in 2014, but it will fall back the following year.
It predicts economic growth being halted by a rise in interest rates in 2015 and a likely squeeze in government spending following that year's general election.
The report said: "This will have the effect of constraining expenditure by both the consumer and government, the two largest spending groups in the economy.
"Lower government expenditure would be a particular issue in Northern Ireland where the business base is of an insufficient scale to fully offset reductions in public sector spending."
While the report forecasts a further increase in Northern Ireland's economic growth to 2.9% in 2015, NICEP then sees it falling back to 2.6% in 2016, then to 1.8% in 2017 and 1.5% in 2018.
It predicts a similar effect on the UK as a whole, with the economy growing by 3.3% in 2014 and then slipping back to 1.9% by 2018.
NICEP's report added that if the government remains committed to further reductions in public sector spending, then the "baton of recovery" must be taken on by the business sector.
The report said: "The uncertainty around future business investment levels and trade performance has resulted in NICEP forecasting a recovery that 'runs out of steam'."
The report does forecast 13,600 new new jobs in Northern Ireland in 2014 followed by a further 9,600 in 2015.
The economic think tank also predicts house prices in Northern Ireland growing by 6.7% this year.
The trend is expected to continue, with prices rising by 8.5% in 2015, 8.4% in 2016 and 8% in 2017.